Shanghai has to build more than buildings to compete

Depending more on services, especially highly value-added services, is an inevitable course for Shanghai - even although its manufacturers, such as those in the automobile, pharmaceutical and petrochemical industries, did generate good growth last year.

Equipment and machinery manufacturing had been suffering from a lack of orders through the year, municipal officials admitted. And that would be enough to signal the same predicament coming for other industries.

This being the case, it is easy to understand why Han Zheng, the chief official of Shanghai, said he "didn't feel quite all right" after he went through the list of the top 100 private corporations based in the city - because the majority of them are real-estate developers.

Private companies are supposedly representative of the more flexible, if not more innovative, forces in the market.

Shanghai doesn't have Beijing's advantage in having the number of research institutions and technology companies that can flourish on contracts with the government's powerful national institutions.

At the same time, it just can't help conceding orders and revenues to traditional industrial manufacturers based in lower-cost locations. With a few exceptions, it won't take long for mass-production based manufacturing to fade away from the oldest industrial city in China.

Shanghai will therefore have to nurture a diverse and dynamic service industry to replace its no-longer-profitable manufacturing operations and to compete successfully within the country and in the world.

But its private capital, still highly, if not dangerously, concentrated in real estate, cannot help it realize its dream of becoming a new services center.

The city government has to prod, encourage and help private investors generate a more powerful wave of change.

The author is editor-at-large of China Daily.